Construction sector builds momentum

The recovery in the construction industry strengthened in February as activity surged to an eight-month high, boosting hopes that the UK's economy will return to growth.









The latest Markit/CIPS Purchasing Managers' Index (PMI) survey for the construction sector - where a reading above 50 indicates growth - rose to 56.5 in February from 53.7 in January, as it continued to bounce back from the disruption caused by the snow in December.



There was a marked increase in housebuilding activity, which declined in the final four months of 2010, while civil engineering work grew at its fastest pace for three years and levels of commercial building work remained strong.



But the recovery in the construction sector is fragile and could be derailed by prices, which rose at their fastest rate since 2008, Government cuts and low levels of bank lending.



Some 53% of businesses said their costs increased since January, with prices of oil, fuel and steel showing particularly steep rises. Today's report echoes findings from the manufacturing sector where prices increased at near-record levels in February.



Levels of optimism about the future were weaker than January and the number of people employed continued to fall, the survey added.



CIPS chief executive David Noble said: "A weather-beaten UK construction sector is showing signs of repair, with stronger rates of activity and a rise in new business continuing the reversal of fortune since the end of 2010.



"The situation is still fragile considering the likely impact of Government cuts. Concern about the level of bank lending is also having a negative impact on confidence."



The figures suggest that the construction sector, which declined by 2.5% in the final quarter of 2010 and contributed to a 0.6% fall in GDP, should return to growth in the first quarter of 2011, said Sarah Ledger, report author and economist at Markit.







Howard Archer, chief economist at IHS Global Insight, said rising prices will put further pressure on the Bank of England to raise interest rates from their record low of 0.5%.



Construction was a significant driver of the UK's economic growth in the second and third quarters of 2010 but the difficulties now facing the sector mean it will not make a big contribution to the UK's economic growth for much of 2011, he added.



He said: "The construction sector does face a challenging environment and it is notable that sentiment in the sector slipped in February.



"Public spending cuts, still-tight credit conditions and a subdued housing market are particular problems for the construction sector. In addition, soaring input prices are squeezing construction companies' margins."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent